Rich hit as cost of living lavish soars

By IBT Staff Reporter09/28/07 AT 10:20 AM

Prices for luxury goods rose twice as fast as consumer prices this year, a study showed, showing the jet set needs even more to fund its lavish lifestyle.

Forbes's Cost of Living Extremely Well Index (CLEWI) -- which measures the price of a basket of luxury goods -- rose by 6 percent in the year to August 2007, Forbes said, more than twice the U.S. consumer inflation rate.

The bottom line is, if you have money and you want to spend it you're going to spend it, said Scott DeCarlo at Forbes.

A normal consumer may pull back, but if you're buying any of these items I don't think the cost of inflation will have any effects, he also said.

The CLEWI has risen at twice the pace of consumer inflation in the last 30 years. The index stood at 772 points in 2007, while the U.S. consumer price index was at 365. Both series started at 100 in 1976.

The number of millionaires and billionaires worldwide is rising rapidly. A study by Cap Gemini showed they held $37.2 trillion (18.5 trillion puonds) in total wealth at the end of 2006.

Soaring prices for oil and other commodities, healthy global economic growth, and the rise of a new affluent middle class in emerging economies in Asia and Eastern Europe are all reasons to explain why cash is flowing in.

The wealth bonanza has caused demand for luxury goods to soar, pushing prices to previously unheard of levels.

A Shanghai resident recently bought a Hermes crocodile-skin bag for 1.6 million yuan (105,800 pounds), Hermes said in June, equivalent to 65 times the city's average annual wage.

And the Cap Gemini study this year noted the success of $150 million apiece wide-body private jets that are so comfortable they function as mobile mansions.

In the Forbes index several items showed double-digit price rises compared to a year ago.

A catered dinner serving 40 at Ridgewells, Bethesda, Maryland, rose by a third to $9,795, representing the index's heftiest price rise. A yearling race horse from championship lines is $710,247, up 14 percent.

A Russian sable fur coat from Maximilian at Bloomingdale's cost $225,000, up 18 percent, while a facelift at the American Academy of Facial Plastic & Reconstructive Surgery rose 17 percent to $17,000.

But the standard fee for 45 minutes with a psychiatrist in New York's Upper East Side is unchanged at $300 for 45 minutes, one bright spot for those in despair over rising prices.